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Wealth management industry not in tune with young investors, says Aite Group


Research by Scivantage, a financial technology provider, and Aite Group, a research and advisory firm, has examined the investing preferences of younger generations and the impact they may have on long-term growth opportunities for wealth management firms.

The report, "The Race for Next-Generation Assets: Can Banks Maintain Their Lead?" focuses on the importance of banks to the younger investor population and discusses how firms can maintain their advantage in the race to capture next-generation assets.

With more than USD40trn expected to transition to younger generations in the US over the next several decades, wealth management firms will need to focus on this new wave of investors and re-evaluate their current service, support and technology models.

Financial institutions that can understand and address the unique investment needs of this emerging segment will be best positioned to capture their future wealth, according to the research.

"Gen-Xers and Gen-Yers have been far less loyal to their investment providers over the last few years compared to Boomer and Silent Generation investors, indicating that young consumers have yet to find their ideal investment providers," says Sophie Schmitt (pictured), Aite Group senior analyst, wealth management. "Banks seeking to maximise their ability to retain and grow share of wallet with young investors should work on growing their online investing capabilities and providing more convenient services."

The survey found that 40 per cent of young investors still consider a bank to be their primary investment provider. By contrast, only 20 per cent of young investors consider an online brokerage firm to be their primary investment provider despite their strong adoption of online trading.

Just under half (44 per cent) of Gen-X and Gen-Y investors surveyed shifted assets to another investment firm or switched investment providers due to availability of online tools.

Forty two per cent of Gen-X and Gen-Y respondents said their bank would need to offer more convenient services and/or more robust online brokerage/trading capabilities in order for them to move more assets to their bank.

About 30 per cent of young investors trade more than 25 times per year and slightly less than 70 per cent trade online more than five times per year.

The number one reason clients shift investments to another firm is fees, such as those tied to accounts, financial advisory and asset management.

"Online investing capabilities are now second nature to Gen-X and Gen-Y investors and will be a requirement for banks that want to attract future high-net-worth or current affluent members of this segment," says Chris Psaltos, vice president, product management, Scivantage. "As younger, tech-savvy investors look for greater control of the investment decision-making process, wealth management firms, particularly banks, must ensure that their online investment platforms are keeping pace with the latest consumer technology innovations."

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